Generic Drugs Market Forecast 2015 2025

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Contents

1.1 Global Generic Drugs: Market Overview

1.2 Why You Should Read This Report

1.3 How This Report Delivers

1.4 Key Questions Answered By This Analytical Report

1.5 Who Is This Report For?

1.6 Methodology

1.7 Associated Reports

1.8 About Visiongain

2.1 What Are Generic Drugs?

2.1.1 Generic Active Ingredients

2.2 A Brief Overview Of The Pharmaceutical Industry

2.3 A Brief History Of Generic Drugs

2.3.1 The Hatch-Waxman Act: The Rise Of Generics

2.4 Demonstrating Bioequivalence: A Major Factor In Approving Generics

2.5 Types Of Generics - Authorised, Branded And Unbranded

2.6 Classification Of Generic Drugs Markets

2.7 Generic Substitution – Bad News For Big Pharma?

2.7.1 The 'Evergreening' Of Pharmaceutical Products

2.8 Regulation Of Generic Drugs

2.8.1 Regulation In The US

2.8.1.1 Obtaining FDA Approval: NDAs And ANDAs

2.8.1.2 The Hatch-Waxman Act Title I: Promotion Of Generic Drugs

2.8.1.3 The Hatch-Waxman Act Title II: Incentives For The Branded Industry

2.8.1.4 How Has The Hatch-Waxman Act Impacted Upon The US Pharmaceutical

Market?

1. Report Overview

2. An Introduction To Generic Drugs

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Contents

2.8.1.5 How The Timing Of Market Entry Influence Product Success

2.8.2 Regulation In Europe

2.8.2.1 EU Marketing Approval Procedures

2.8.2.2 The 8+2+1 Rule: EU Data Exclusivity

2.8.2.3 Supplementary Protection Certificates

2.8.2.4 Variation In Drug Development Regulations Between European Countries

2.8.2.5 The Move Towards Harmonisation Of Standards

2.8.2.6 Europe’s Unitary Patent System And Its Likely Impact On Generics

2.8.3 Regulation In Japan

2.8.4 Regulation In China

2.9 Compulsory Licensing

2.10 Market Definition And Scope Of This Report

2.10.1 Market Sizing And Revenue Reporting

3.1 The Global Generic Drugs Market: Market Overview

3.1.1 Segmenting The Global Generic Drugs Market

3.2 The Global Generic Drugs Market In 2014

3.3 Regional Distribution Of The Generic Drugs Market In 2014

3.4 The Global Generic Drugs Market: Sales Forecast 2015-2025

3.5 Generic Drugs: Regional Market Forecast 2015-2025

3.5.1 Changes In Generic Drug Regional Market Shares, 2015-2025

3.6 Leading National Markets For Generic Drugs: Market Forecast 2015-2025

3.7 National Markets That Will Drive Generic Drugs Growth

3.8 Changes In Market Shares By National Market, 2015-2025

3.9 The Global Market For Generic Drugs: Drivers And Restraints 2015-2025

3. Generic Drugs Market, 2015-2025

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Contents

4.1 Generic Drugs In The US: Market Overview

4.1.1 The Effects Of Generics On Healthcare Spending In The US

4.1.2 The Hatch-Waxman Act And Its Ongoing Effects

4.1.3 Consolidation In The Drug Development And Supply Chain Driving US Generics

4.2 US Historical Generic Penetration Rates

4.3 Leading Companies Operating Within The US Generic Drugs Market

4.3.1 The Increasing Acceptance Of Generics Amongst Consumers

4.3.2 Affordable Care Act: Expanding Medicare Coverage

4.4 The US Generic Drugs Market: Drivers And Restraints 2015-2025

4.5 The US Generic Drugs Market: Market Forecast 2015-2025

4.6 The US Generic Drugs Market – Strategic Analysis

4.6.1 Will Biosimilars Dictate The Future Of The US Generics Market?

4.6.2 The Backlog Of ANDA Applications

4.6.3 The Generic Drug User Fee Amendments (GDUFA)

4.6.4 Shortages Of Generic Drugs Will Restrain the Market

4.6.5 Is ‘Pay For Delay’ Restricting Fair Competition In The US Generics Market?

4.7 US Generic Drugs Market: A Range Of Factor Contributing To Growth

5.1 European Generic Drugs: Market Overview

5.1.1 Europe: A Blend Of Matured And Developing Generic Drugs Markets

5.1.2 Factors Hindering Generic Penetration

5.1.3 Predominant Pricing Systems And Generic Penetration In European Markets

5.1.3.1 Lower Patient Co-Payments Drive Demand For Generics

5.1.3.2 The Effects Of Tendering For Generic Medicines

4. US Generic Drugs Market, 2015-2025

5. Leading European Generic Drugs Market, 2015-2025

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Contents

5.1.4 Will Europe Move Towards Free-Pricing Systems?

5.1.5 Challenges In The European Regulatory Environment

5.1.6 Ending ‘Pay For Delay’ Tactics In Europe

5.1.7 FDA And EMA Joint Data Sharing And Inspections

5.2 EU5 Generic Drugs Market: Market Forecast 2015-2025

5.3 EU5 Markets: Changing Market Shares By Country, 2015-2025

5.4 Germany: New Reforms To Medicinal Pricing May Impact Market Entry

5.4.1 German Generic Drugs Market: Generic Penetration by Volume, 2000-2014

5.4.2 German Generic Drugs Market: Generic Penetration by Value, 2000-2014

5.5 French Generic Drugs Market: Healthcare Reforms Impacting On Market Growth

5.5.1 French Generic Drugs Market: Sales Forecast 2015-2025

5.5.2 French Generic Drugs Market: Generic Penetration by Volume, 2000-2014

5.5.3 French Generic Drugs Market: Generic Penetration by Value, 2000-2014

5.6 UK Generic Drugs Market: A Mature Market With Growth Potentials

5.6.1 UK Generic Drugs Market: Sales Forecast 2015-2025

5.6.2 Cost Pressures And Demand-Side Policies Drive UK Generic Penetration

5.6.3 UK Generic Drugs Market: Generic Penetration by Volume, 2000-2014

5.6.4 UK Generic Drugs Market: Generic Penetration by Value, 2000-2014

5.6.5 Pharmacists As Enforcers Of Generic Substitution

5.7 Italian Generic Drugs Market: Branded Generics Hindering Overall Growth

5.7.1 The Tightening Of Italy’s Patent Legislations

5.7.2 The Italian Healthcare System – A Tale Of Falling Budgets

5.7.3 Italian Generic Drugs Market: Sales Forecast 2015-2025

5.7.4 Italian Generic Drugs Market: Generic Penetration by Volume, 2000–2014

5.7.5 Italian Generic Drugs Market: Generic Penetration by Value, 2000-2014

5.8 Spanish Generic Drugs Market: Light At The End Of The Tunnel

5.8.1 Cost-Containment Measures Helping To Boost Generic Drug Use

5.8.2 Spanish Generic Drugs Market: Sales Forecast 2015-2025

5.8.3 Spanish Generic Drugs Market: Generic Penetration by Volume, 2000-2014

5.8.4 Spanish Generic Drugs Market: Generic Penetration by Value, 2000-2014

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Contents

6.1 Generic Drugs In The Asia-Pacific Market: Market Overview

6.2 Japanese Generic Drugs Market: High Barriers To Entry

6.2.1 Public Perception Of Generics In Japan

6.2.2 Japanese Generic Drugs Market: Leading Companies

6.2.3 Japanese Generic Drugs Market: Sales Forecast 2015-2025

6.2.4 Japanese Generic Drugs Market: Generic Penetration by Volume, 2000–2014

6.2.5 Japanese Generic Drugs Market: Generic Penetration by Value, 2000-2014

6.2.6 Government Initiatives Driving Generic Penetration

6.2.7 Japanese Attitudes to Generic Drugs

6.3 Chinese Generic Drugs Market: Domestic Companies Dominate The Market Landscape

6.3.1 The Major Drivers Of Growth In The Chinese Generics Market

6.3.2 Chinese Generic Drugs Market: Sales Forecast 2015-2025

6.3.3 Compulsory Licensing Of Generic Drugs

6.3.4 Expansion Of Healthcare Coverage And Reimbursement

6.3.5 Chinese Generic Drugs Market: Generic Penetration by Volume, 2000–2014

6.3.6 Chinese Generic Drugs Market: Generic Penetration by Value, 2000-2014

6.3.7 The Impacts Of Price Controls And The Anhui Model

6.4 Indian Generic Drugs Market: Regulatory Failures Hindering Sales Growth

6.4.1 Leading Companies In The Indian Generic Drugs Market

6.4.2 Indian Generic Drugs Market: Sales Forecast 2015-2025

6.4.3 The Reforms To India’s Drug Prices Control Order And Its Likely Effects On Generic

Drug Revenues

6.4.4 Expansion Of The National Healthcare Coverage Increases The Need For Generics

6.4.5 Has Recent Manufacturing Quality Failures Dented India’s Generics Growth?

6. Asia-Pacific Generic Drugs Market, 2015-2025

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Contents

7.1 Generic Drugs In The Asia-Pacific Market: Market Overview

7.1.1 Emerging Economies: Improving Logistics And Better Infrastructure Catalysing

Generics Growth

7.2 Brazil

7.2.1 Brazilian Generic Drugs Market: Sales Forecast 2015-2025

7.2.2 Generics To Facilitate Low-Income Earner’s Access To Medicines

7.2.3 Foreign Generic Drug Manufacturers Entering The Brazilian Market

7.3 South Korea – Treacherous Terrain For Generics

7.3.1 Pharmaceutical Price Controls And Measures Being Implemented In South Korea

7.3.1.1 KORUS FTA: The Free Trade Agreement Between South Korea And The US

7.3.1.2 The Free Trade Agreement Between Korea And The European Union

7.3.2 South Korean Generic Drugs Market: Sales Forecast 2015-2025

7.4 Russian Generic Drugs Market: Improving IP Protection To Aid Market Growth

7.4.1 Historical Trends In Russia’s Pharmaceutical Production And Distribution

7.4.2 The Pharma2020 Strategy - Healthcare And Industry Reform

7.4.3 Self-Medication In Russia And The Integral Role Of Pharmacies

7.4.4 Russian Generic Drugs Market: Sales Forecast 2015-2025

7.5 Turkey

7.5.1 Cost Cutting Measures And Their Effects On Turkish Generics

7.5.2 Will Turkey Become A Production Base For High Technology Products?

7.5.3 Turkish Generic Drugs Market: Sales Forecast 2015-2025

7.5.4 Regulatory Guidelines For Generic Drugs In Turkey

7.5.5 How Effective Has Turkey’s Health Transformation Programme Been?

7.6 Mexico

7.6.1 Government Programmes To Vitalise Generic Penetration In Mexico

7.6.2 Regulatory Changes And The Inception Of COFEPRIS

7.6.3 Mexican Generic Drugs Market: Sales Forecast 2015-2025

7. Emerging Generic Drugs Market, 2015-2025

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Contents

8.1 Generic Drugs: Continuous Expansion To Rival

8.1.1 The Leading Companies In The Global Generics Market

8.2 Teva

8.2.1 Teva: Historical Financial And Performance Analysis, 2009-2013

8.2.2 Teva Generic Drugs Sales Forecast 2015-2025

8.2.3 Teva Generic Drugs Portfolio Analysis, 2015

8.2.3.1 High-Value Generics to Drive Teva’s Generics Growth?

8.2.3.2 The Shift Towards Innovation

8.2.3.3 Copaxone Leads Teva’s Moving Focus

8.2.3.4 The Threat Of Generic Erosion To Teva’s Products

8.2.4 What Does The Future Hold For Teva’s Generic Drugs Business?

8.3 Novartis

8.3.1 Novartis: Historical Financial And Performance Analysis, 2009-2013

8.3.2 Novartis Generic Drugs Sales Forecast 2015-2025

8.3.3 Novartis Generic Drugs Portfolio Analysis, 2015

8.3.3.1 Emphasis On Difficult-to-Manufacture Products

8.3.3.2 FDA Quality Concerns At Sandoz Manufacturing Plants

8.3.4 What Does The Future Hold For Novartis’ Generic Drugs Business?

8.4 Actavis (Allergan)

8.4.1 Actavis: Before The Mega-Merger

8.4.2 Actavis: Historical Financial And Performance Analysis, 2009-2013

8.4.3 Actavis: Generic Drugs Sales Forecast 2015-2025

8.4.4 Actavis: Recent Developments

8.4.4.1 Valeant and Mylan’s Failed Merger Attempts On Actavis

8.4.4.2 Actavis Acquisition Of Warner Chilcott

8.4.4.3 Actavis’ Work On Biosimilars

8.4.4.4 Exiting The Chinese Generics Market

8. Leading Companies In The Generic Drugs Market, 2015-2025

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Contents

8.4.4.5 Actavis’ Acquisition of Allergan

8.4.5 What Does The Future Hold For Actavis’ Generics Business?

8.5 Mylan

8.5.1 Mylan: Historical Financial And Performance Analysis, 2009-2013

8.5.2 Mylan Generic Drugs Sales Forecast 2015-2025

8.5.3 Mylan: Recent Developments

8.5.3.1 Acquisition Of Abbott’s Generic Business

8.5.3.2 Mylan To Double Manufacturing Capacity by 2016

8.5.3.3 Mylan Acquires Rights To GSK’s Advair, Diskus And Seretide

8.5.3.4 The Race To Market Copaxone Generics

8.5.3.5 Strategic Acquisition of Agila Expands Mylan’s Injectables Business

8.5.3.6 The Biosimilar Collaboration With India’s Biocon

8.5.4 What Does The Future Hold For Mylan’s Generic Drugs Business?

8.6 Pfizer

8.6.1 Pfizer: Historical Financial And Performance Analysis, 2009-2013

8.6.2 Pfizer’s Acquisition Of Hospira

8.6.3 Pfizer Generic Drugs Sales Forecast 2015-2025

8.6.4 Pfizer’s Restructuring Strategy

8.6.5 Future Prospects For Pfizer’s Generic Business

8.7 Abbott

8.7.1 Abbott: Historical Financial And Performance Analysis, 2009-2013

8.7.2 Abbott Generic Drugs Sales Forecast 2015-2025

8.7.3 Abbott: Recent Developments

8.7.3.1 Abbott After The Spin-Off Of AbbVie - The Established Products Business

Segment

8.7.3.2 Acquisition of Solvay Pharmaceuticals and Piramal Healthcare Solutions

8.7.3.3 Acquisition Of CFR Pharmaceuticals Opens New Markets

8.7.4 What Does The Future Hold For Abbott’s Generic Drugs Business?

8.8 Aspen

8.8.1 Aspen: Historical Financial And Performance Analysis, 2010-2014

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Contents

8.8.2 Aspen Generic Sales Forecast 2015-2025

8.8.3 Aspen: Recent Developments

8.8.3.1 Aspen Acquires Merck MSD’s Dutch API Plant

8.8.3.2 Acquisition Of GSK’s Anti-Thrombosis Brands

8.8.4 Future Outlook For Aspen’s Generic Business

8.9 Sanofi

8.9.1 Sanofi: Historical Financial And Performance Analysis, 2009-2013

8.9.2 Sanofi Generic Sales Forecast 2015-2025

8.9.3 Sanofi’s Strategies To Develop Generic Sales

8.9.3.1 Emerging Market Acquisitions

8.9.4 Future Prospects For Sanofi’s Generics Business

8.10 Hospira (Pfizer)

8.10.1 Hospira: Historical Financial And Performance Analysis, 2009-2013

8.10.2 Hospira: Recent Developments

8.10.2.1 Hospira’s Expansion Through Strategic Acquisitions

8.10.2.2 Manufacturing Concerns And Remediation Efforts

8.10.3 What Does The Future Hold For Hospira’s Generic Business?

8.11 Fresenius Kabi

8.11.1 Fresenius Kabi: Historical Financial And Performance Analysis, 2009-2013

8.11.2 Fresenius Kabi Generic Drugs Sales Forecast 2015-2025

8.11.3 InnoPharma Licensing Deal Bolsters Portfolio Grown Via Past Acquisitions

8.11.4 Fresenius Kabi’s Joint Venture With PT Soho Global Health

8.11.5 Future Prospects For Fresenius Kabi’s Generics Business

8.12 Sun Pharma/Ranbaxy

9.1 Market Factors Influencing The Global Generic Drugs Market

9.2 SWOT Analysis Of The Global Generic Drugs Market, 2015-2025

9. Qualitative Analysis Of The Generic Drugs Market, 2015-2025

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Contents

9.2.1 Strengths

9.2.1.1 Improving Clarity Around Regulatory Processes

9.2.1.2 The Continuous Government Support For Generic Manufacturers –

Precursors For Innovation

9.2.1.3 Higher Pace Of Growth Compared With Innovative Pharma

9.2.1.4 Globalisation And Its Impact On Manufacturing Capabilities

9.2.2 Weaknesses

9.2.2.1 Safety And Quality Concerns In The Manufacturing Process

9.2.2.2 The Non-Uniformity Of Excipients

9.2.2.3 The Uncertainty Around Patent Extensions And Exclusivities

9.2.2.4 Sceptical Physicians And The Negative Consumer Perception Of Generics

9.2.2.5 Inefficiencies In Certain Regulatory Approval Processes

9.2.3 Opportunities

9.2.3.1 Higher Value Biosimilars And Branded Generics

9.2.3.2 Patent Expiries Creating Opportunities

9.2.3.3 Changing Socio-Economic Conditions Impacting Generic Drug Demand

9.2.3.4 Emerging Markets – Expected To Drive Generics Volume Growth Over Time

9.2.4 Threats

9.2.4.1 Government Cost-Cutting Initiatives Impacting On Generic Drug Prices

9.2.4.2 The Complexity Surrounding Patents And Patent Expiries

9.2.4.3 Pharmacies And Healthcare Payer Consolidations

9.2.4.4 Possible Impacts Of A Declining Patent Pool

9.3 Porter’s Five Force Analysis Of The Global Generic Drugs Market, 2015-2025

9.3.1 Power Of Buyers

9.3.2 Power Of Suppliers

9.3.3 Rivalry Among Competitors

9.3.4 Threat of New Entrants

9.3.5 Threat of Substitutes

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Contents

10.1 Interview With Dr Atholl Johnston, Professor Of Clinical Pharmacology At Barts And The

London School Of Medicine And Dentistry, Queen Mary University of London, and Director

Of The Laboratory Of Analytical Services International Ltd.

10.1.1 Cost – A Major Determinant Of Generic Drug Development And Usage

10.1.2 The Trade-offs Between Drug Cost And Drug Quality

10.1.3 The Regulatory Shortcoming Affecting Generic Drugs

10.1.4 On The Need To Standardise Toxicology And Associated Tests For Generics

10.1.5 Pharmacovigilance And The Need To Differentiate Generic Drug Products

10.1.6 Future Predictions For Bioequivalence In Generic Drugs

10.1.7 Therapeutic Areas That Will Drive The Growth Of Generic Drugs

10.2 Interview With Mr Peter Sharott, Pharmaceutical Adviser – Cancer & Blood, NHS England.

10.2.1 The Risk Of Non-Adherence And Treatment Failure

10.2.2 The Conflict Between Cost-Effectiveness And Patient Safety

10.2.3 Bioequivalence And Consistency In The Production And Packaging Of Generics

10.2.4 The Quest For Optimum Equilibrium In Generic Drugs Market Competition

10.2.5 Future Outlook For Generics

11.1 Overview Of Current Market Conditions And Market Forecast, 2014-2025

11.2 Generic Drugs As A Strategic Tool In Healthcare

11.3 Major Drivers Of Growth For Generic Drugs, 2015-2025

11.4 The Regulatory Landscape For Generic Drugs

11.5 Leading Generic Drug Manufacturers

11.6 Future Outlook For The Leading Regions Within The Global Generic Drugs Market, 2015-2025

11.7 Generic Penetration By Volume In Leading National Markets

11.8 What Does The Future Hold For The Global Generic Drugs Market?

10. Expert Opinions from Our Primary Research

11. Conclusions

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Generic Drugs Market Forecast 2015-2025: Opportunities for Leading Companies

Table 5.6 German Generic Drugs Market: Generic Penetration by Value (%), 2000-2014

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Generic penetration by proportion of total pharmaceutical sales (%)

31.9 30.0 29.9 30.4 34.3 34.6 35.9 36.4 36.8 35.9 34.7 35.3 36.7 36.9 37.3

Figure 5.8 German Generic Drugs Market: Generic Penetration by Value (%), 2000-

2014

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)

Year

Generic penetration by proportion of total pharmaceutical sales (%)

Source: Visiongain 2015; Gesund-heits-bericht-erstat-tung des Bundes (Federal Health Monitoring System,

Germany) (2000-2012 figures). The 2013 and 2014 figures are visiongain’s estimates.

Source: Visiongain 2015; Gesund-heits-bericht-erstat-tung des Bundes (Federal Health Monitoring System,

Germany) (2000-2012 figures). The 2013 and 2014 figures are visiongain’s estimates.

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Table 5.7 The French Generic Drugs Market: Market Forecast ($bn, AGR%, CAGR%),

2014-2025

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 France ($bn) 7.2 7.7 8.2 8.8 9.4 9.9 10.5 11.0 11.5 12.1 12.6 13.2

AGR (%) 6.7 7.2 7.1 6.4 5.8 5.4 5.2 4.8 4.6 4.6 4.4CAGR (%) 2014-19CAGR (%) 2014-25

6.6 2019-25 4.85.6

Figure 5.9 The French Generic Drugs Market: Market Forecast ($bn, AGR%), 2014-2025

5.5.2 French Generic Drugs Market: Generic Penetration by Volume,

2000-2014 Table 5.8 and Figure 5.10 show the trend in generic penetration by volume of filled prescriptions in

France from 2000 to 2014. Generic penetration in this developing market continues to increase

largely as a result of generic substitution by pharmacies.

0.0

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2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

AGR

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Market Size ($bn) AGR (%)

Source: Visiongain 2015


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Figure 8.4 Novartis: Historical Generic Drugs Sales ($bn, AGR %), 2009-2013

8.3.2 Novartis Generic Drugs Sales Forecast 2015-2025 Loss of exclusivity and increased competition for its generics were among the factors that affected

Novartis and caused a revenue decline of 8.1% for its Sandoz business in 2012. Declining sales in

major markets such as the US and Germany acted as a catalyst for revenue decline in that year.

However since 2012, Novartis has experience sustained growth in its generics business.

US retail generics and biosimilars sales for the company was reported to have grown in 2014,

driven by the launch of the generic version of Diovan monotherapy, as well as by increasing sales

of biosimilar and oncology injectable products, which was partly offset by the effect of customer

consolidation.

Visiongain expects sales growth to continue in 2015 and beyond, driven by Novartis’ strengths in

the manufacturing of differentiated generics (more specialised or complex products which are

harder to manufacture) and biosimilars, where it is considered the global market leader, as well as

strong growth in other European markets and in the emerging markets of the Asia-Pacific, Russia

and Brazil. Revenues from recently-launched generics of Novartis’s own drugs Diovan (valsartan),

Lipitor (atorvastatin, Pfizer) and Imitrex (sumatriptan, GSK), as well as its 2012 acquisition of

dermatology generics company Fougera Pharmaceuticals, will also contribute.

-10.0

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2009 2010 2011 2012 2013

AGR

(%)

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s ($

bn)

Year

Novartis Generics Sales ($bn) AGR (%)

Source: Novartis 2015; Visiongain 2015

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Sales growth is expected for Abbott’s branded generics in the second half of the forecast period

too. We expect the acquisition of CFR Pharmaceuticals to add up to $800m to Abbott’s annual

sales. As new products are marketed either organically or through acquisitions, we predict that

Abbott will manage to maintain its prominence in the global market for generic drugs.

Table 8.19 and Figure 8.13 show visiongain’s forecast of Abbott’s generic drugs revenue through

to 2025.

Table 8.19 Abbott: Generic Drugs Revenue Forecast ($bn, AGR%, CAGR%), 2014-2025

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Abbott ($bn) 5.1 5.2 5.3 5.5 5.8 6.1 6.4 6.7 7.0 7.3 7.7 8.0AGR (%) 1.7 2.5 3.4 4.7 5.2 5.0 4.7 4.4 4.8 4.9 4.6CAGR (%) 2014-19CAGR (%) 2014-25

3.5 2019-25 4.74.2

Figure 8.13 Abbott: Generic Drugs Revenue Forecast ($bn, AGR%), 2014-2025

0.0

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2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

AGR

(%)

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enue

($bn

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Abbott ($bn) AGR (%)



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9.3.1 Power Of Buyers Power of buyers – Medium

Generic drugs are generally sold to distributors (wholesalers). This is particularly true for generic

drugs sold in the US. Other buyers of generics include direct sales to pharmacies, hospitals, and

individuals consumers. We note that in the US and Europe particularly, distributors have been

consolidating and the largest distributors have a disproportionately large market share.

Generic drug prices are likely to continue to decrease during the forecast period as a result of

increasing competition among manufacturers and the ability of large pharmacy chains and retailers

to offer generic drugs at lower prices than before. Some reports indicate that profit margins on

generic drugs have fallen from around 25% (double that of large oil companies) to around 5%.

Visiongain notes that the US market has a relatively large number of competing manufacturers

compared to the leading European national markets. At the same time, the purchasing power of

retailers such as Kmart, Wal-Mart and Target has allowed them to buy generics in large volume

and offer monthly deals to consumers. In some cases this occurs as part of a loss-leader strategy,

with generics priced at or below cost price to draw in customers.

Cost pressures on distributors are being passed on to manufacturers. There is also a trend

towards reducing reimbursement of generic drugs by healthcare providers and health insurance

schemes. The power of buyers is likely to increase over the forecast period as cost pressures on

buyers increase.

9.3.2 Power Of Suppliers Power of suppliers - Low

Pharmaceutical companies traditionally purchase high volumes of raw materials and keep excess

manufacturing capacity in order to maintain production at consistently high levels. This practice

therefore limits the bargaining power of suppliers. Problems with product availability, where these

have occurred, have been due to violations of good manufacturing practice or other regulatory

infringements rather than interruptions in the supply of raw materials. The generics industry also

tends to act as a supplier of active pharmaceutical ingredients (APIs) to other pharma companies,

giving it a secure early supply chain. However, we note that the price of raw materials has been

steadily increasing in recent years; this provides fascinating possibilities as to the future influence

that suppliers will hold on the generics market.